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What's a condor?
Bill Hardy
> ** Original Subject: RE: What options to sell?
> ** Original Sender: "Moshe Shalom" <moshe_shalom@xxxxxxxxxx>
> ** Original Date: Thu, 10 Aug 2000 02:03:12 -0500 (CDT)
> ** Original Message follows...
>
> Hi Guy,
>
> I am a writer of options out here in the holy land and would advise you to
> take in consideration the psychological effect of "unlimited loss". When you
> buy options, you can loose only the amount invested and the effect on your
> decision making is much less stressing. Opening a position by writing
> options can quickly become very dangerous in case it does not go your way.
>
> The stops should be much tighter (I remember you said you don't have
> any...).
>
> In any case, some points of reference:
>
> 1. Put/Call stats (at the money) is more important than ever. I don't know
> if you can get open positions numbers in real time (here, I cannot) but it
> would be great for you as a tool to see what the sentiment is.
>
> 2. Invest by delta and not by fix amount of dollars. Meaning that if writing
> 10 options will give you $100 per point change in the security, calculate
> the risk/reward based on this and not write options for $10000.
>
> 3. Time is in your favor, but it changes. It is going much faster near the
> expiration date than before. So if you want time to work for you should
> write near term options. On the other hand, the swings in price and in
> standard deviation are the greatest when you approach expiration and here we
> return to the psychological effect and the risk you are willing to take.
>
> 4. The best options players don't go for a direction but for the volatility.
> It demands a lot of capital and a lot of time, but it is the safest.
>
> 5. Concentrate on one or two strategies (Spreads, Condors, Butterflies,
> Strangles, Straddles, etc...) and learn their pro/cons. It takes time to get
> the feeling for the oddities in real trading of these babies.
>
> I hope this helps and the best of luck,
>
> Moshe Shalom
> Israel
>
>
> -----Original Message-----From: owner-metastock@xxxxxxxxxxxxx [mailto:owner-
metastock@xxxxxxxxxxxxx]On
> Behalf Of Guy Tann
> Sent: Thursday, August 10, 2000 4:38 AM
> To: Metastock User Group
> Subject: What options to sell?
>
>
> List,
>
> OK, we've finally determined that we're going to be in the option writing
> business as opposed to the option buying business. Our primary reasons for
> this are:
> 1- Time dilution works in our favor.
> 2- Capitalizes on our SP trading system.
>
> I would like to pose the following question assuming that we want to sell
> ITM Calls since we are now short the S&P futures. In looking at the various
> Calls available, how would I determine which ones to write (or which others
> not listed and why)?
>
> 1- SXZLO Dec 2000 1475 Calls @ 88.1250
> 2- SXMFT Jun 2001 1500 Calls @ 143.25
> 3- SXZIO Sep 2000 1475 Calls @ 38.00
>
> First, there are a few things that need to be considered. Our trades, on
> average, last for approximately two weeks. They can, at times last a month
> or two but that would be quite unusual. We would like to maximize the time
> dilution factor in our favor and at the same time minimize our whatever
> margin we have to maintain. We learned about this the hard way a trade or
> two ago when I sold 10 Sep SPX Calls at 46 and didn't impact my trading
> account at all while my brother sold August Calls and had to put up margin
> of $89,000 for the 10 Calls he wrote.
>
> I guess I better call my Schwab desk to find out what the margin rules are
> for trading the near month (you can tell we're futures traders).
>
> Thanks in advance,
>
> Guy
>
> Never be afraid to try something new. Remember, amateurs built the ark,
> professionals built the Titanic.
>
>** --------- End Original Message ----------- **
>
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